China Manufacturing Agreement, China Manufacture Contract Drafting

Saturday, 29 September 2012 01:48

Compared to domestic transactions, the risks associated with international sales are greatly multiplied. It is a rare international sales agreement that can rely on minor variations of standard terms, as is so often the case in domestic agreements. Especially when you are to sign a manufacturing agreement or manufacturing contract with a Chinese factory or manufacturer, it's essential to draft a very good manufacturing contract to protect your interest in case any dispute arise out of the transaction. Our China contract lawyer's assistance is vital for your success when you are doing business in China.

Foreign laws, export/import and currency exchange controls, treaties, transit issues, inspection of goods, insurance, tariffs—all these and more must be taken into account in contract negotiations.

We incorporate hundreds of model clauses designed to cover every contingency, including such factors as the following (and a great deal more), which are the essential terms and conditions should be included in a China manufacturing agreement:

definitions;

Incoterms;

price adjustments;

documentation;

labelling;

delivery dates;

transportation modes;

limitation of liability;

confidentiality;

arbitration; and

antitrust issues.

As an experienced attorney, John Miller have gradually developed a list of 60 practical contract-drafting tips. As a refresher, he routinely refer to my tip-sheet (as well as other checklists) just before he draft a contract. Additionally, he uses this list (as well as other checklists) when he review someone else’s contract. I think his advice is very helpful.

While drafting contracts, there are many things to consider, the most helpful of which are listed below:.1. Be precise (accurate, complete and, exact), clear, specific, and focused.

2. Balance precision with simplicity.

3. Use plain English.

4. Avoid jargon.

5. Use sentences with less than 25 words.

6. Prefer short words to long words (avoid unnecessarily complex).

7. Avoid double negatives.

8. Keep subject and verb together.

9. Use active not passive voice (“Buyer terminated the contract”...not...”contract was terminated by Buyer”).

10. Understand the whole design before you begin drafting (outline first for clarity).

11. Sequence logically by chronology of events.

12. Put related provisions together (cohesion).

13. Don’t assume. What is missing? Look for conflicts.

14. Boil a sentence down to its essential point.

15. Use kernel words not long derivatives (“state”...” not … “make a statement”).

27. Use “which” and “that” properly (“that” without a comma is restrictive/essential; “which” with a comma is non- restrictive/supplemental. While revising, whenever you spot a "which" that does not follow a comma, odds are it needs to be "that".

28. Three passes on edits...(basics....tighten...fine tune).

29. Cut adverbs by choosing a more precise noun.

30. Cut adjectives by choosing a more precise noun.

31. Cut the non-essential.

32. Avoid sexist language.

33. The entire document counts, not isolated provisions.

34. Contra proferentem (construed against drafter).

35. Specific words control general ones.

36. No Latinisms.

37. When in doubt, punctuate. 38. Punctuate to prevent misreading.

39. Punctuate consecutive adjectives.

40. Punctuation of states (“In Texas we indemnify.” “In Austin, Texas, we indemnify.”)..41. Year punctuation (comma after year...”On June 1, 1998, he …” / no comma after year ...”In June 1998 he ...”.42. Avoid words with more than one meaning (ambiguity).

43. Sometimes it’s okay to be strategically vague (such as the use of the word “reasonable”).

44. Avoid adjectives before two nouns (“research contracts and grants”).

45. “Rule of Last Antecedent” (qualifying phrases apply to the word/phrase immediately preceding, not to other words/phrases).

46. Avoid shot-gunning to cover every possibility when a single word will do.

47. Arrange words with care.

48. Use familiar concrete words.

49. Brevity.

50. Sleep on what you have written, then attack afresh the next day.

51. Use the correct legal name of the parties in a contract.

52. Repeat only when repetition is necessary to improve clarity.

53. Don't use the word "biweekly" since it has two meanings (i.e., twice a week vs. every other week).

54. Write numbers as both words and numerals such as "ten (10)" to reduce the chance of errors.

55. Contract writing is not creative writing; be clear, direct, and precise, not reflective, provocative or entertaining.

56. Be consistent in using the terms of art like " Licensed Product" and "Licensed Software". Don't call them items, goods, products, etc., elsewhere in the contract.

57. Write as if a judge and jury would have to understand it.

58. Define important words when first used.

59. Consider "what if" scenarios to flush-out issues.

60. When you write "including", consider adding "but not limited to.”

Be sure that others don't describe your contract-drafting as follows: "Construing such conglomerate provisions requires a skill not unlike that called for in the decipherment of obscure palimpsest texts.”

Should you need to sign a China manufacturing agreement, please consult us and we will give you advice and quote to you a price. We endeavor to provide professional service and affordable price.

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Peter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.